Which of the Following Statements Is True of American Options

question 390

Multiple Choice

Which of the following statements is true of American options?

• A) The lower the underlying share price, the higher the value of a call option.
• B) The lower the exercise price, the lower the value of a call option.
• C) The longer the time to expiration, the lower the value of a call option.
• D) The greater the interest rate, the lower the value of a call option.
• E) The lower the risk of the underlying security, the lower the value of a call option.

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Definitions:

Free Cash Flow

A financial metric that measures the amount of cash generated by a company after accounting for capital expenditures.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue, indicating financial performance.

Cost of Goods Sold

Expenses directly linked to the creation of a company's sold goods, which include the costs of materials and labor.

Cash Paid

The total amount of cash disbursed by a company during a given period for various purposes, including operating expenses, asset purchases, or debt repayment.